Are you one of the 77 percent of Americans who are anxious about their financial situation? While you’re probably taking steps to gain more financial freedom, attaining that goal is always easier said than done.
You aren’t going to become financially free if all you’re doing is finding ways to pay off your debt and increase your income. It takes a mastery of several financial skills to achieve the financial prudence you need to gain complete control of your financial life.
If you’re wondering what these financial skills are, you’ve come to the right place!
1. Basic Budgeting (Money Management)
A 2021 survey established that about 55 percent of American adults don’t use a budget to manage their money. If you’re one of them, it’s not surprising that you’re struggling to gain financial freedom.
Without a budget, it’s difficult to know where your hard-earned money is going. And without that knowledge, you can’t effectively rein in your spending.
This is why basic budgeting is one of the most important financial skills. You don’t have to take accounting classes to know how to draw a basic budget. All you need to do is know your income, write down your needs, and determine how much money to allocate to your wants.
Follow your budget keenly and constantly look for items to cut off. It won’t be long before you start seeing a positive change in your finances.
Besides being a key financial skill, budgeting is also a basic personal finance principle. Read this guide to personal finance to learn more about other principles.
2. Saving Money
The median savings balance for people under 35 is a whopping (pun intended) $3,240. This is according to the Federal Reserve Board.
Whichever way you slice it, you’ll arrive at one conclusion: young adults aren’t saving enough. There are varied reasons for this, including harsh economic times, but what are the odds many people don’t have the skill to save money?
You see, saving isn’t about how much money you’re earning. You could be making six figures a year, but without knowing how to save, you’ll easily blow through it and end up with an empty rainy-day fund at the end of the year.
If you’re struggling to put away some money from your paycheck, automate it. Your bank will automatically send a specified amount into your savings account.
3. Credit Building
Your credit history has a bigger impact on your financial life than you might think. Lenders use it to determine your creditworthiness; landlords can use it to establish your sense of financial responsibility. Even an employer can use your credit history to determine your suitability for certain positions.
This makes credit building a vital financial skill. You must know what you need to do to build your credit score into the green zone and keep it there. Some helpful tips include borrowing and repaying the loans on time and keeping a healthy income-to-debt ratio.
Financial Skills That Shape Your Life
In a perfect world, no one would need to worry about money. But this world is far from perfect, and finances deeply affect our lives. The average person has no choice but to develop the financial skills that are the foundation of a healthy financial life.
Explore our blog for more financial tips.